Wave Life Sciences Ltd. (NASDAQ:WVE) Analysts Just Cut Their EPS Forecasts Substantially

One thing we could say about the analysts on Wave Life Sciences Ltd. (NASDAQ:WVE) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business. The stock price has risen 4.2% to US$3.99 over the past week. It will be interesting to see if this downgrade motivates investors to start selling their holdings.

Following the downgrade, the latest consensus from Wave Life Sciences' six analysts is for revenues of US$33m in 2023, which would reflect a substantial 119% improvement in sales compared to the last 12 months. Losses are presumed to reduce, shrinking 13% from last year to US$1.35. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$46m and losses of US$1.19 per share in 2023. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

View our latest analysis for Wave Life Sciences

There was no major change to the consensus price target of US$8.57, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Wave Life Sciences, with the most bullish analyst valuing it at US$17.00 and the most bearish at US$4.00 per share. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that Wave Life Sciences' rate of growth is expected to accelerate meaningfully, with the forecast 185% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 16% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 6.9% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Wave Life Sciences is expected to grow much faster than its industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Wave Life Sciences.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with Wave Life Sciences, including major dilution from new stock issuance in the past year. Learn more, and discover the 2 other flags we've identified, for free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.